GRAB HOLDINGS LIMITED(GRAB.US)：PATH TO PROFITABILITY FIRMER ON IMPROVED COMPETITIVE DYNAMICS

　　1Q22 GMV and revenue results beat our forecast
Gross merchandise value (GMV) and revenue at Grab Holdings Ltd. rose 31% YoY (7% QoQ) and 6% YoY (88% QoQ) in 1Q22 to US$4.8bn and US$228mn, beating our forecasts of US$4.4bn GMV and US$129mn. We attribute the results to a better-than-expected recovery in growth and a stabilization of incentive spending driven by improved competitive dynamics and a robust supply of drivers. The loss in adjusted EBITDA improved to US$287mn in 1Q22 vs. a loss of US$305mn in 4Q21, largely in line with our forecast.
　　Trends to watch
　　Growing ecosystem on recovering ride-hailing demand, better-than-expected adoption of DFS. Ride hailing and delivery GMV improved 9% and 5% QoQ in 1Q21, and digital financial services (DFS) off-Grab Total payment value (TPV) rose 9% QoQ, with all three metrics topping management guidance. We believe Grab will continue seeing strong recovery in its mobility segment while DFS will see sustained growth as the firm rolls out its buy-now-pay-later (BNPL) products for merchants and OVO pursues its open ecosystem strategy by forming new partnership with external parties to facilitate payment. We are optimistic about Grab’s recovery and growth narratives, but we will continue monitoring the impact of fuel inflation, which drives up order value, likely affecting value proposition and reducing driver earnings, likely affecting driver supply negatively.
　　The stabilizing incentive spending points to an improved competitive dynamics in delivery business and more robust driver supply. On the delivery front, we believe Grab will continue benefiting from a more stable competitive landscape where aggressive subsidy programs by Grab’s major competitors are scaled back, as is evident in its market share gains against regional players in all markets. In the ride-hailing business, which the firm refers to as mobility, driver supply base is being rebuilt to meet soaring demand as movement due to COVID-19 restrictions started to ease in Southeast Asia. We believe that incentives as a percentage of GMV in both the delivery and mobility segments will taper off as Grab focuses on driving organic growth and enhancing its profit margin.
　　Financials and valuation
　　We raise our 2022 and 2023 revenue forecasts 36% and 17% to US$1.3bn and US$2.2bn and our adjusted EBITDA forecasts to losses of US$764mn and US$85mn, from losses of US$901mn and US$199mn. Our revisions are due to an improved incentive spending level in both the delivery and mobility segments, and robust growth in Grab’s DFS segment, driven by quicker adoption and rollout of financial products such as BNPL. We use an SOTP valuation method. Following a change in investor sentiment, we believe that monetization and profitability assumptions are critical to the long-term valuation of internet companies. We adopt a valuation method that normalizes 2025E EV/EBITDA discounted back to 2023 at 7.1% for delivery services, 2023E EV/EBITDA to value mobility services, and 2023E P/S to value DFS, given the business is still in its infancy. We maintain OUTPERFORM but raise our TP 16.2% to US$4.30, offering 34% upside.
　　Risks
　　Grab faces competition risks; ride-hailing segment faces regulatory risks; DFS segment faces growth uncertainty.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。